Microsoft: A Fading Empire?

This coming November marks another arrival of Microsoft’s annual Professional Developers Conference, or PDC to the acronym-challenged. The event is a who’s who gathering among Windows developers – to preview all the latest and greatest in Microsoft software and listen to keynotes from the company’s lead engineers as they lay out the platform’s roadmap: A dog and pony show, more or less, but it serves as a drumbeat for developers to gather around a platform that once stood as the pinnacle of innovation, laying the very blueprint for the PC industry to follow. At least that used to be the case.

Today’s computing landscape is vastly different from that of the late nineteen-nineties, when Microsoft stood at the zenith of power and influence. In those days, personal computing revolved around Windows and Office, with Internet Explorer connecting everyone to the world wide web. By that time Microsoft had won the office suite wars, leaving its nearest competitor Lotus Smartsuite a broken unwanted product sold for the price of scrap metal to IBM, for god knows what reason. Netscape couldn’t keep up with the pace of innovation from Microsoft (yes, believe it or not, there was a time when IE actually was a kick-ass browser), and its Navigator browser continued to lag behind, ultimately fading into obscurity. Microsoft was at the top of its game. They had achieved market supremacy to become a software empire. And despite what the naysayers will tell you, their products were exceptionally good (Win2Kpro FTW!), and much of their success was deserved.

But much like the British Empire at the turn of the 19th century, Microsoft’s power and influence has faded. The company that once led the way in tech has long since been surpassed by smaller more innovative players. And slowly but steadily this software empire is diminishing. Competitors like Google and Apple are now the trend-setters in this industry, with web 2.0 movers and shakers like Facebook and Twitter having the most influence. In this new order Micro has new meaning in the company’s name.

That is by no means to say the company is dead; far from it. Microsoft is sitting on a huge pile of cash amassed over two decades during is rise to power, giving it plenty of capital to invest and leverage. However their products are clearly no longer important. Take Internet Explorer for example, which once held a commanding lead of 95% of browser market share, now fallen to less than 50% by many studies, with Mozilla Firefox, Safari, Chrome, and Opera making up the dominant half of the pie chart. IE is relevant.

Even Windows, Microsoft’s biggest cash cow, isn’t safe from competition – with Apple eating away at its share of the desktop like a cancerous growth, and Linux making inroads onto government and corporate desktops. Now the company is racing to bolster its image by opening boutique stores in answer Apple’s own retail strategy. Will it work? It’s difficult to envision consumers hurrying excitedly into a Microsoft store to check out Windows 7 running on those “cool” new Dell Inspirons.

They are setting themselves up for failure. The problem is that Apple’s retail strategy works because it tightly controls product pricing – meaning it doesn’t compete with other retailers in a race to the bottom, as we see in the PC industry. Pricing is consistent no matter where you buy. What you pay at an Apple store is roughly what you will pay at any other reseller. Microsoft doesn’t have that luxury. Consumers who walk into one of its stores will be price matching against Best Buy, Amazon, and the legions of other vendors and resellers. Lots of customers will be walking out its stores to buy elsewhere based on price. That’s a fail.

I blame this hair-brained strategy on Microsoft’s old guard management operating from a playbook as outdated as its products. In every facet of product strategy Microsoft is simply responding to a competing threat. Zune to iPod. Bing to Google. Windows Vista (and now 7) to OSX. Silverlight to Flash. It goes on. All are responses to a competitor’s product, and all are failures. You get the feeling that Microsoft’s upper management is swinging wildly at every threat, like an exhausted heavy-weight boxer trying in vein to fight off a more nimble opponent. If Google entered the pastry business Microsoft would shortly follow with its own similar strategy, without even grasping why they were doing it.

So while I look forward to yet another PDC, I do so with waning enthusiasm. The company that helped make the Internet ubiquitous and brought personal computing to the masses, is now a mere shadow of its former self, now remembered for its former glories. The sun is setting on Microsoft.